Productivity has fallen recently in Finland particularly in the public sector. The country has a relatively high number of small firms. In recent years the price elasticity of demand and the price elasticity of supply of the products made by Finnish firms have changed.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2018). The mark or mark type is shown in brackets.

1. [1] The private sector is the part of the economy where market forces / price mechanism / producers and consumers' decisions allocate resources
2. [1] firms are owned by private individuals
3. [1] The public sector is the part of the economy where the government makes the decisions / government controlled / government-owned firms
4. [1] Productivity may fall as the result of a decline in the quantity or quality of education/training
5. [1] workers will be less skilled
6. [1] A decline in investment
7. [1] workers will work with less equipment
8. [1] A decline in wage rates
9. [1] will reduce workers' motivation
10. [1] Worse working conditions
11. [1] reduce job satisfaction
12. [1] A rise in working hours
13. [1] making workers more tired
14. [1] Work may become more repetitive / less interesting
15. [1] which may result in workers becoming bored
16. [1] Change in average age of workers
17. [1] e.g. older workers may be less up to date with new technology / younger workers may have received less training / be less experienced
18. [1] Higher tax rates in a country
19. [1] may reduce workers' motivation
20. [1] Poorer healthcare in a country
21. [1] reducing workers' physical strength / mental alertness
22. [1] A more elastic demand would mean that the firm could reduce price
23. [1] to raise revenue
24. [1] as demand would rise by more than the fall in price
25. [1] if revenue rises by more than costs, profit will increase
26. [1] A more elastic supply will mean that the firm can adjust more quickly the amount it sells when price changes
27. [1] the firm will be able to take greater advantage of an increase in demand / rise in price
28. [1] the firm will be able to take more of its products off the market should price fall
29. Up to 5 marks for why they might:
30. [1] Small firms may provide a personal service
31. [1] may have greater contact with their customers
32. [1] more responsive to changes in consumer demand
33. [1] May be more flexible
34. [1] fewer people to consult
35. [1] May be producing products in low demand
36. [1] not facing competition from large firms
37. [1] May be a local monopoly / in a good location
38. [1] may not face competition in the area
39. [1] May cooperate with other small firms
40. [1] enable advantage to be taken of e.g. buying in bulk
41. [1] May supply specialised products / in a niche market
42. [1] including to large firms
43. [1] May receive government subsidies
44. [1] lowering their costs of production
45. Up to 5 marks for why they might not:
46. [1] May be driven out of business
47. [1] by larger firms with lower costs of production
48. [1] better known
49. [1] larger firms can take advantage of economies of scale
50. [1] examples of economies of scale (Up to 2)
51. [1] Large firms may take over / merge with smaller firms
52. [1] to gain market power
53. [1] take advantage of economies of scale
54. [1] Government subsidies may only be short term
55. [1] Some small firms may cease to exist when their owners retire/die
56. [1] e.g. sole traders
57. [1] Less capital available / difficulties in raising capital
58. [1] make it difficult to purchase new / high quality equipment
59. [1] make it difficult to invest in R&D